Yesterday, I wrote about a research paper that tested seven of the fundamental assumptions underlying economics, often called stylized facts. While these fundamental relationships often are violated for long times (sometimes even decades), they hold in the very long run. Except for two. Even over 147 years and incorporating the distortions from international relationships between 17 large economies around the globe there is no stable relationship between money supply and inflation, nor between inflation and long-term interest rates.
Thanks for the blog in general and this article in particular. It's a breath of fresh air in a landscape of "sameness". I read the green line in the chart above differently. It says the impact of money supply on inflation is a moving target from nil to over 4%. The why's and how's is the subject for further study which at the stage one can only speculate.
Thank you for sharing your insight and knowledge. May I add a heuristic: when the price of energy increases 80% YoY inflation occurs. Today oil is up YoY 85%
One thing to maybe consider is the change in the way that inflation is being calculated. It would be significantly higher now if calculations from the 80s were used.
Thanks for the blog in general and this article in particular. It's a breath of fresh air in a landscape of "sameness". I read the green line in the chart above differently. It says the impact of money supply on inflation is a moving target from nil to over 4%. The why's and how's is the subject for further study which at the stage one can only speculate.
Thought this was good, reminded me of this post on LinkedIn https://www.linkedin.com/pulse/non-economists-take-inflation-our-faith-central-banks-mangrelli
The lead is unstable, but the YoY% change does have a relationship with inflation.
Thank you for sharing your insight and knowledge. May I add a heuristic: when the price of energy increases 80% YoY inflation occurs. Today oil is up YoY 85%
One thing to maybe consider is the change in the way that inflation is being calculated. It would be significantly higher now if calculations from the 80s were used.